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Open Book Management shares financial information with employees with the expectation that they use that information to feel confident that the owner trusts them and that they can see where the company is spending money and how they might be able to help.
Let's get open... or maybe not?
For more detailed information listen to the audio version of the podcast or watch the livestream recording.
Business Principle
Trust + Transparency + X = Employee Success
Solving for 'X'...
Open Book Management
Put simply, open book management (OBM) is sharing company financial information with your team. The expectation is that they will appreciate the gesture of trust and be able to see and offer ways to improve the business. There are risks associated with OBM that we're going to need to get into as well.
Benefits
• Positive Employee/Employer Relationship - sets a stage of trust
• Helps employees understand the company as a whole
• Assists them in performing their job more effectively/efficiently
• Gives them perspective to come up with creative solutions to solve company/customer problems
Risks
▾ If your a sole proprietor or partner... this is your Personal Financial Data
▾ Employees 2nd guessing financial decisions
• They may not have a comprehensive perspective
• You don’t pay them to analyze and 2nd guess you
• Could undermine rather than strengthen employee feelings toward company
How I Did it for 2019
When I decided to try open book management for my own company I basically just gave the team read access to the entire accounting system (not including specific salary information). My assumption was that the gesture of openness would be appreciated and they would understand where and how they could have a positive impact.
My Team's Comments
"It really helped us understand what was going on... and cut down on 'BS' spending."
"I honestly stopped looking at it. It was scary."
What is 'X'?
After I reviewed the open book management program for 2019 I had a few thoughts.
If you're going to provide open book management you need to be committed to also providing a framework around it that will allow each member of your team to put it into perspective. Regular meetings (or company appropriate communication) where the finances are discussed need to be held.
There may be hard questions and if you're committed to open book management you need to be prepared to answer them honestly. You might want to practice: "I made a mistake."
You're a business owner and you know that the decisions you make often require you to connect dots across disciplines; across stakeholders even across time (ex. accounts payable vs. accounts receivable). The information we have is imperfect and; while there is a difference between 'trusting our gut' and 'flying by the seat of our pants'... that difference can seem like whim for people not living in your head. Okay, let's face it, sometime it IS 'whim'.
The bottom line?
X = Clarity
I hate meetings and I don't enjoy explaining things I think should be 'obvious'. Consequently... I have work to do on my own open book management program.
Meetings and 'obvious' are podcast topics unto themselves so we'll save that for another time but the takeaway here is that a good open book management policy is more than just access to financial information.
Practical Action
If you think your business could benefit from open book management... you're probably right. Overall I believe the gains outweigh the risks, if the program is well thought out (or let's be honest even sort of thought out). Where I dropped the ball was in providing a structured delivery of the information with an opportunity to answer questions and clarify how the financials tie together and to the decisions that were made.
Getting started with open book management should be done with more forethought than I did in 2019.
The first question:
Are you willing to share the information? If you're not... don't judge it. This is personal financial data for small business owners and just because you may be willing to trust people with it doesn't always mean they are ready for that responsibility.
If you're ready to move forward, answer a few questions:
How will employees access the information?
- Monthly reports
- Constant system access (what I did and not necessarily recommended)
- Weekly emails
- etc...
What format will you use to provide clarity and answer questions?
Closing
Do you have any experiences with open book management? Drop a comment below and share what you've learned!
Click the link above or use your favorite pod catcher to listen to the full episode.
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